As per chat, claiming this bug.

This isn't a P3 - upgrading

Interesting:  VR works the same as 2D - I can't find a way to dismiss the dialog without blocking the permission.  Touching outside the dialog does nothing, and using the system back button blocks the permission.  Hence I'm not sure yet that there's a way to "just dismiss" the pop-up, as if the permission was never requested in the first place.

I'll double check with Amir.

Result:  Things are working as intended.

We match Clank, in that a click outside the VR popup is analogous to a system back button dismissing the Clank popup.

Why this is confusing (explanation from Dominick Ng and Tim Loh):

From, https://www.chromestatus.com/feature/6443143280984064 Tim extracted:

Temporarily stop an origin from requesting a permission following the third dismissal of a permission prompt. The stop will be lifted after some amount of time has passed (initially 1 week), after which the origin may request the permission again. A further dismissal will apply the temporary stop again.
For web developers who are testing features, the block can also be removed by changing the permission's setting in the lock icon's page info dialog, or by clearing your browsing data.

And further, from Tim:

It is meant to be reset if you explicitly allow the permission. This seems to be broken ... Ah, I see what's going on.  Setting the permission to ALLOW removes embargo, but doesn't reset the counter. That means that if the permission is then set back to Ask, the site gets to prompt one more time before being embargoed again.

The only way to reset the counter is Clearing Browsing Data.

Summary:

To test this properly:
- Reset site permissions for the test page
- Clear browsing data
- Exercise dismissal of the prompts

When I did this, I was able to dismiss each permission prompt twice, leave VR, and see that no permissions are blocked.

Phew.

Removing MVP hotlist, but assigning back to Doug for visibility.  Doug, please mark this as "won't fix" if you're satisfied.  Thanks!

Sounds weird but sounds good.
Resolving as Won't Fix (aka ByDesign)